Share story

NEW YORK — Stocks plunged again today, suffering their worst day of 2005 and the third straight triple-digit loss for the Dow Jones industrial average. Deepening concerns over economic growth and higher prices led to the worst week of trading so far this year.

The Dow fell 198 points after an already uneasy market was disappointed with the latest economic news. The Federal Reserve reported drops in manufacturing and other industrial production, while a Labor Department report also showed higher oil costs driving up import prices and worsening Wall Street’s chronic inflation worries.

The negative impact of the economic data on stocks was bolstered by lower-than-expected profits from IBM Corp. Strong earnings from General Electric and Citigroup were overlooked, but analysts said earnings would nonetheless be a key factor in overcoming the recent selloff.

“Earnings are really the only hope for this market,” said Brian Pears, head equity trader at Victory Capital Management in Cleveland. “If, on the whole, earnings can go up, then we might be able to overcome oil and inflation and all the other things.”

According to preliminary calculations, the Dow fell 191.24, or 1.86 percent, to 10,087.51, after falling 125 points Thursday and 104 points Wednesday. It was the Dow’s worst close since Nov. 2 of last year.

Broader stock indicators also lost considerable ground. The Nasdaq composite index dropped 38.56, or 1.98 percent, to 1,908.15 for its worst showing since Oct. 25.

The Standard & Poor’s 500 index was down 19.43, or 1.67 percent, at 1,142.62, its lowest level since Nov. 3.

All three major indexes set five-month lows for the second straight session, prompted by disappointing earnings in the tech sector and questions about the economy. With Friday’s losses, it was the first time the Dow lost 100 points three sessions in a row since late January 2003.

For the week, the Dow lost 3.64 percent, the S&P 500 was down 3.27 percent, and the Nasdaq tumbled 4.56 percent. The major indexes are also at their lowest points of 2005, with the Nasdaq down 12.29 percent, the Dow falling 6.52 percent and the S&P having lost 5.72 percent.

Bond investors were pleased with today’s results, however, as the bond market continued to rally. The yield on the 10-year Treasury note fell to 4.24 percent from 4.34 percent late Thursday. The dollar was mixed against other major currencies, while gold prices moved higher.

Crude oil prices were lower and continued a two-week downtrend, with a barrel of light crude settling at $50.49, down 64 cents, on the New York Mercantile Exchange.

The sharp rise in oil prices so far this year is to blame for the jump in import prices, the Labor Department said. Import costs rose 1.8 percent in March, but even without oil, prices rose 0.3 percent, which is still more than the 0.2 percent rise economists had expected.

“There’s a lot of evidence that when we have oil averaging $53 or $54 per barrel, that’s inflationary, and we got a whiff of that today in the import prices,” said Peter Cardillo, chief strategist and senior vice president with S.W. Bach & Co. “It doesn’t help that we’re starting to see the economy enter a slowing mode heading into the second quarter here.”

Investors looking at the Fed’s industrial output report also questioned whether higher energy and materials costs were affecting manufacturing growth as well. Overall industrial production rose 0.3 percent in March, up from 0.2 percent in February, but the increase came only from utility production due to a colder-than-average month, and manufacturing and other industrial sectors showed losses for the first time in six months.

IBM said an inability to close deals before the end of the quarter, combined with higher pension costs, dragged on its earnings. The technology company, which missed Wall Street forecasts by 6 cents per share, hinted at a major restructuring this year. IBM tumbled $6.94, or 8.3 percent to $76.60, and was the biggest loser on the Dow.

General Electric rose 25 cents to $35.75 after the industrial and media conglomerate reported a 25 percent jump in first-quarter profits, with nine of the company’s 11 disparate divisions reporting double-digit growth. The company’s forecasts for the second quarter and full year were in line with Wall Street’s estimates.

Citigroup beat Wall Street’s expectations for its quarterly profits by 2 cents per share, with profits rising a modest 3 percent year-over-year. The financial company also said its board had authorized the repurchase of an additional $15 billion in stock. Citigroup added 35 cents to $45.75.

The lagging pharmaceutical sector saw new life after Genentech Inc. reported strong results from trials of its Avastin drug in breast cancer patients, and Ely Lilly & Co. received a favorable patent ruling on its best-selling anti-psychotic drug Zyprexa. Genentech surged $10.72, or 18.3 percent, to $69.35, while Lilly climbed $2.91 to $58.07.

Declining issues outnumbered advancers by more than 4 to 1 on the New York Stock Exchange, where volume came to 2.18 billion shares, compared with 1.9 billion on Thursday.

The Russell 2000 index of smaller companies was down 11.16, or 1.9 percent, at 580.78.

Thursday’s losses in U.S. markets had a ripple effect overseas, as the Nikkei stock average fell 1.66 percent. In Europe, Britain’s FTSE 100 closed down 1.09 percent, France’s CAC-40 lost 1.92 percent for the session, and Germany’s DAX index tumbled 2.04 percent.